Development of the capillitium ofPerichaena vermicularis has been examined using light and electron microscopy. Two mechanisms are involved in the production of the thread-like structures. Initiation of capillitial development begins with the formation of long rows of vacuoles throughout the previous undifferentiated protoplasm of young plasmodiocarp. A homogeneous layer of amorphous material referred to as the cortical layer surrounds the vacuoles. Arrays of microtubules are present directly outside the cortical layer and apparently serve as a framework for the formation of the vacuolar system in which capillitial walls develop.